By Kathie Canning
Through a special arrangement, what follows is an excerpt of a current article from Private Label Buyer, presented here for discussion.
It wasn't too long ago that Safeway found itself a bit overwhelmed. Between the late 1990s and 2001, the retail giant acquired five regional retail chains throughout the country - each with a loyal consumer base that, in some cases, appeared less than overjoyed with Safeway's tweaks and changes.
In the 2001 to 2003 timeframe, Safeway says it also undertook the difficult task of centralizing all of its marketing, merchandising and procurement functions. With its marketing sources directed elsewhere, Safeway's private label program lacked focus. In fact, the company found itself with an overabundance of private labels - some 70 of them representing thousands of food and non-food products.
In 2003, Safeway executives formulated a game-changing new strategy designed to differentiate its offerings from other conventional supermarkets. This strategy involved the renegotiation of labor contracts, the upgrade of perishable quality, remodeling of stores to the Lifestyle format and revitalization of its corporate brands.
Safeway got a much-needed shot in its private label arm in late 2005, when it hired James White, who previously worked for Nestle Purina and Procter & Gamble, to serve as senior vice president of consumer brands.
A major accomplishment during White's tenure is Safeway's rebranding of its entire private label portfolio - or what the company calls its consumer brands. Over the course of two years, the chain whittled a cumbersome assortment of 70 consumer brands down to 10 "power brands" The rebranding effort - which also entailed the development of attractive new packaging - encompasses approximately 3,000 product items.
"All are clearly positioned based on consumer and household insights," Mr. White told PL Buyer.
Such insights now are critical to Safeway's corporate brand program, and Mr. White stresses that they drive consumer solutions such as the company's recently launched Eating Right and O Organics for Babies lines.
"Both [lines] are driven by deep consumer insights and deliver multi-category lifestyle solutions," he said. "Overall, we are in the brand-building business, not traditional private label."
The O Organics and Eating Right portfolios also mesh well with Safeway's growing reputation in the health and wellness arena.
A vice president with another private label manufacturing company called the Eating Right line the "most impressive 'consumer brand' line" in which he's participated during his 28-year career.
"It is meeting a true consumer need and is being well-communicated and funded, which will make it a very big success," he adds.
From an investment standpoint, Jim Hertel, managing partner for Willard Bishop, applauds Safeway's ongoing efforts dedicated to the O Organics line.
"[O Organics] makes a statement and it's very consistent with Safeway's image, both internally in terms of the focus on food and health, and externally in what they're doing with the Lifestyle stores and a lot of the other pieces in terms of branding the Safeway operation. ... So I think that's an investment [in the company's future]."
Discussion Questions: What is most impressive about Safeway's recent success with its private label lines including Eating Right and O Organics? What can other retailers attempting to build strong private label programs learn from Safeway?